Highlights from Kulibayev's visit to Atyrau UPDATE (+photos)

November 11 2012, 17:56

The elite of Kazakh oil industry paid visit to Atyrau on November 9 under the leadership of Timur Kulibayev, Chairman of Kazakhstan Association of Oil and Gas and Energy Complex Organizations KAZENERGY.

Guests dedicated the first half of day to solemn meeting on the occasion of the 65th anniversary of the famous oilman Uzakbai KARABALIN. Atyrau Oblast Akim Baktykozha IZMUKHAMBETOV, Oil and Gas Minister Sauat MYNBAYEV, chairman of the board of JSC NC "KMG" Lyazzat Kiinov, former chairman of the executive committee of Guriev (Old name of Atyrau) Yessen TASKINBAYEV, CEO of "SRI" Caspimunaigas" Mansiya BABASHEVA congratulated the birthday person. Karabalin was given the Honored Citizen of Atyrau Oblast decoration.

Following this, Tengizchevroil office hosted the meeting of Coordination Council for Science, Innovations and Kazakh Content Development in Oil and Gas Sector Issues, where governor Izmukhambetov spoke of the need to diversify the economy through development of small and medium business.

He said major users of nature give preferrence to Western oil service companies when making long term contracts. Therefore the share of Kazakh content in goods today makes 4% in TCO and 2% in NCOC.

The same situation is diagnosed in the sphere of human resources usage. Companies put expats before national specialists who with knowledge of foreign languages and international experience remain non-demanded.

As per the latest changes to the RoK Law on Use of Subsurface Resources, companies should give off 1% of their overall annual revenue for scientific research and experimental engineering. This is aimed to create new productions that will satisfy the needs of oil and gas companies for competitive products, thus consolidate business with innovations. Mechanism of this requirement has not been worked out yet. However, in governor's opinion, participation of subsoil users should not be limited to paying donations only.

- Experts unanimously think the age of easy oil is over, today the process of production is accompanied by newest engineering technologies. And they are not cheap, says Oil Minister Mynbayev.

He believes, today's difficulties in maintaining local content emerged due to failure to specify these requirements when signing contracts with subsoil users at the very beginning or if they were agreed they were specified vaguely.

Given this, increase of local content in goods just by 1% means increase in orders for Kazakh products by 15bln tenge.

Over the last three years minimum local content requirements were post factum included into 170 previously signed contracts.

Mynbayev admitted the lowest Kazakh contents are in production share agreements of Kashagan and Karachaganak projects as well as the agreement with TCO:

- But we have the opportunity of working with them at points when considering large projects.

When it comes to the position of foreign companies, as per our data, they treat the requirements of Kazakh side with some irritation and talks on these issues are quite tense. Being politically correct the minister did not raise this point, although he strictly stands up for Kazakh interests at the talks.

Foreign investors claim Kazakh local content requirements do not match the common policy of attracting investments, moreover, upon Kazakhstan's joining the WTO these requirements will no longer be relevant. In response, Kazakhs say PSAs should be reconsidered -- this persuades foreigners to think about increasing Kazakh content. Such a pull-the-rope game in process.

- This year, for the first time ever we imposed a penalty of 127mln tenge for failure to perform local content requirements. For violations in procurement transparency subsoil users will be fined with 1.8bn tenge, says Kanatbek SAFINOV, Responsible Secretary of the RoK Oil and Gas Ministry. - However, there is a positive trend as a whole. In 2009, 8.8bn tenge was spent on Kazakh goods, in 2010, 36.5bn and in 2011 Kazakh plants received orders worth 43bn tenge from oilmen.

KAZENERGY's local content action plan was adopted at the meeting of the council and an expert group was formed to stimulate and monitor new technologies and innovations in large oil and gas projects. KAZENERGY signed memorandums on cooperation and mutual understanding with MOG and Atyrau Oblast Akimat separately.

- Besides local content requirements, all contracts will include allocation of funds for social sphere. Up to now we have had to rely on good will of companies. We should do justice to TCO - despite there is no such a must in the contract, the company has been yearly allocating up to $20mln for social purposes in the region, said Izmukhambetov after signing memos.

Later, high rank oilmen visited ANPZ (Atyrau Refinery) and the construction site of the Aromatic Hydrocarbons Production Complex. In conversation with Chinese managers from Sinopec, a question about staff composition was raised. The response was they needed another 400 highly qualified welders and steel erectors:

ANPZ reps complained about high staff turnover at the construction - allegedly, many people quit after three-four months despite being paid 180,000 tenge a month. To recall, during the recent strikes at the complex construction the stikers claimed to have been paid 50-60,000 tenge a month. For the greater part of them, the very reason to resign was low salary.

Sinopec managers were recommended applying to KazMunayGas and Oil and Gas Ministry first when having shortage in workforce, and to local authorities afterwards.

- The start-up of all the three refineries in Kazakhstan will allow a 100 percent supply to the domestic market with the whole range of oil products that match Euro-5 standard and in future prospective, we will export the surplus products. It is clear why ANPZ restoration has started early - it is old, therefore its work scope is larger, said Minister Mynbayev.

The visit ended with presenting 80 families moved from the village of Eskene with keys to new apartments in the Nursaya municipal district. KazMunayGas entirely covered the expenses of population shift. Governor Izmukhambetov promised a new school and a kindergarten will soon be built in neighborhood. And for now, warm buses will be allocated so that children can reach the closest schools.